Spot approval goes away next month for FHA condos

In order to obtain FHA financing, a condo building must be FHA approved. This meant that the building had to “right of first refusal” and met FHA lending guidelines. Many buildings are not FHA approved, and in those cases, the lender could seek “spot approval.” Spot approval was not fun and often did not go well.

Effective October 1, 2009, spot approval is gone. Instead, an FHA direct endorsement lender can obtain approval for an entire building, even with a right of first refusal. Here is a great summary of the new process.

Since FHA mortgages are really the only game in town, this will help open up FHA financing to many smaller condo buildings that were left off the FHA approved list because of a right of first refusal in the declaration or because approval was just too hard.